NY Times Execs Think People Will Pay $20 To $30 Per Month For The iPad Edition Of The NY Times

from the let-me-introduce-you-to-newsday dept

Wow. Doesn't the NY Times have some of the world's most famous and accomplished economists writing for them at times? You would think that, at some point, as they tried to figure out business model ideas, they would think to actually run some of these ideas by an economist. We've already explained why the NYT's decision to put up a paywall makes little sense from an economic standpoint, but now it's getting even worse. You see, there are still some folks who bizarrely believe that tablet computers -- or, really, just Apple's iPad -- represent the savior for journalism because suddenly people will pay for apps. Already, this suggests a rather tragic misunderstanding of the economics of apps, but apparently it's even worse than that.

Rumors are flying that there's a battle within the NY Times on how to price their app for the iPad. Those on the newspaper side of the house apparently believe that it should be priced at $20 to $30/month to avoid cannibalizing the print product. By the way, if you want a simple tip for how to fail at business, it's to make a decision to avoid cannibalizing your own business. When you do, you've just made it clear that a competitor is going to cannibalize your business for you. The folks on the interactive side of the house think that $10/month makes a lot more sense and believe that pricing it at the $20 to $30 range is suicidal. Of course, if you thought that the management at the NYT's was really crafty, you might believe that this whole story was floated to reset the anchor price, though I have trouble believing that's true.

The problem, of course, is that the NY Times is pricing based not just on trying not to cannibalize the physical product, but without regards to basic economics, and the fact that everyone knows that without a physical product, the costs of the paper actually go down. Yes, of course the costs of all the reporting and editing remain -- no one is denying that. But you no longer have the printing and delivery costs, which are substantial. And reasonable people would expect that, at the very least, the cost of the app will reflect that. Either that, or (more likely), they'll realize that other, more well managed news providers will step in and offer up news for free in order to get the market share that the NY Times once had.

Oh, and one final word for the NY Times. I recognize that you're a better paper, with a much better reputation, than your neighboring competitor, Newsday, but remember what happened when Newsday tried to charge $20+ per month for access to its digital version? It got a grand total of 35 people to sign up. I'm sure more would sign up for a NY Times' app, but how many more?

How about a $20/month ad-free version for the minority of people who don't like clutter surrounding their stories and are willing to pay, and a free but ad-supported version for people who don't like to pay for stuff?

or paying subscribers get access to a story an hour before being published.

are they even trying to succeed?

If the papers all go under, I will no longer have wrapping paper delivered to my door each morning.

Speechless

That is absolute insanity pure and simple.

I have always thought it was just good old fashioned greediness that motivated them but this makes me realize that they really, truly, just don't get it. They are just that clueless about the digital world and how it works.

There was an interesting story about HP back in the day...

By the way, if you want a simple tip for how to fail at business, it's to make a decision to avoid cannibalizing your own business.

Back in the day (LaserJet II-III days), HP's (really David Packard's) policy was, "Put ourselves out of business every 6 months."

At this time, HP engineers made the LaserJet III series and the DeskJet 500 series and made more money than at any other time in their history.

Since then, HP has been trying to sit on their laurels and release poor printers at high prices with through-the-roof consumables. They also try to control what ink you put in there and even tell you it's empty when it's still 25% full, with no way to override it.

Their market is a mere fraction of what it once was and their overall profits continue to go down, down, down.

I now own 2 Brother laser printers that are fantastic and have the cheapest toner of anyone. I also now have a Canon Pixma series printer, again with nice quality and drivers and the cheapest ink price of any of the majors. I used to LOVE HP printers, but they worked really, really hard to make me hate them instead.

It's amazing. When you simply give people what they want at a reasonable price, you make a fortune.

Apple figured this out with iTunes as did Netflix, etc. It's really not difficult, just give people what they want.

NYT - Mad on iPad

Well, as a (free) subscriber to NYT, I can say that I would not pay more than about $7 per month to receive it direct to my eBook device (iPad or any other "pad")... so I don't see why anyone else would, either. I am one of the people they are seriously trying to attract, and they would lose my interest... so nope... wrong price point. So, they pay $600,000 and get 35 subscribers, and learn a valuable lesson. I guess it's their decision. I am smart enough not to waste that kind of money on something that is common sense, but hey, I'm not a journalist (or a journo-economist). Best of luck to them... 'cause they are sure going to need it.

Hey, they're dreamers. That's a good thing. Dreaming about pink elephants and rabbits with pocket watches, or $20/month for soft periodic content though; probably not quite as productive. Especially when I already get content delivered to my phone for free. I doubt I'd pay much more than $5 per month for a soft copy of any one magazine I really, really would like to have delivered to my phone, as long as it had content I wasn't already getting with the freebies I currently get. There are a few... but not $20/month. No way.

Why should digital paper costs _have_ to fall?

Good article. Totally agree with the cannabilisation argument and I can see why you would argue that the digital costs of a newspaper should fall as the physical costs are removed from the business. But that doesn't neccasarily mean the price should go down. You could (should?) price the product so that it reflect the value that the consumer gets from it and therefore extract as much of the consumer surplus that you can.

Now I was initially annoyed that the value of many digital books was as high as physical copies for my e-reader and I resented paying that price exactly because of your original argument. But then it occurred to me the real value in the book was the idea. If the idea hasn't changed because of the medium then why should the price? Ergo - I have managed to convince myself that (some) ebooks have a valid reason for their current price.

Now jut because I _might_ be willing to pay that price for (some) ebooks does not mean that this argument will wash for the papers. Frankly they don't offer me the value that a book does - hence I won't pay for them or certainly not the hard copy price. Cost based pricing is an irrelevance, as sadly, are the news papers :)

Re: Out of their God-damned minds

HAHAHAHHAHA - thats why we are where we are in our economicals now. let them eat cake, idiots. do they really not see that there are numerous COMPETITORS charging NOTHING, just as good or better than the stinky old outdated times. fugging republican pukes. Just for this I am uninstalling the NYTimes app from my iphone and giving it the lowest rating.I rarely read it anyway since huffington post is better eat that capitolist pigs

Re: Why should digital paper costs _have_ to fall?

Though, by not altering the price, you're essentially saying the consumer purchased the physical product AND are paying residual pricing for the physical product the newspaper previously provided.

So, I would spend $500 of my own money on a newspaper delivery device ... and then spend another $20-30/month for the newspaper on top of that, without reaping financial benefits of paying less per issue to save cost in the long-term.

So, I get less and pay more! That's exactly how to price the digital version of a newspaper to increase "value"¡¡¡ Now, if they do things with the digital edition that they couldn't or didn't do with the print version that provides additional value over the previous print editions ... then we're talking something interesting. Like, for my $30/month a reporter will actually LISTEN and RESPOND to comments and criticism of their reports ...

But simply repackaging an old product, slapping the "NEW" sticker on it, and schlepping it out the door without a price break ... no dice.

Competitors

By the way, if you want a simple tip for how to fail at business, it's to make a decision to avoid cannibalizing your own business. When you do, you've just made it clear that a competitor is going to cannibalize your business for you.

See the NYT's problem is that they're so arrogant, they don't think they have any competitors.

Re: NYT - Mad on iPad

They aren't going to get only 35 subscribers. This is the *New York Times* we are talking about¡

They will get 1,000 or so subscribers. So they will gross about $20,000 a month, maybe $15,000 a month after you net out sales and marketing costs. And their variable costs for supporting this project (mostly amortized hardware, connectivity, amortized web design, and salaries) will probably be in low six figures a month. That's my naked prediction.

Re: There was an interesting story about HP back in the day...

I have to double ditto this. I now use an Epson Workforce 600 and I think it is a great printer. The software installs easy, is relaible, wireless, etc.... I only use to use HP printers too. Bought 2 HP laptops. It took 5 phone calls to HP Totally Care Less before they finally agreed to replace an obviously bad keyboard on one of them.

Given The Kind Of People Likely To Buy The iPad ...

After paying for the iPad and the 3G data plan (for the commute), the Times wants more $$ every month?? I think not. That's the power of the web. LOTS of other FREE sources for the daily news, with ads that I'll happily click on to make money for someone else besides the Times...

Better be something worth it

If it's going to be a straight take from their newspaper edition, it will never happen. Now if they go all out and do something like Wired plans on doing... Maybe, I can see people paying for it, just not at the price they are suggesting.

Re: There was an interesting story about HP back in the day...

I now own 2 Brother laser printers that are fantastic and have the cheapest toner of anyone. I also now have a Canon Pixma series printer, again with nice quality and drivers and the cheapest ink price of any of the majors. I used to LOVE HP printers, but they worked really, really hard to make me hate them instead.

Actually, you used to LOVE Canon products even back in the original HP LaserJet days, you just didn't know it. Canon designed the original LaserJet print engine for HP.

Re:

Re:

"The iPad is beginning to encourage the sort of overhyped and illogical optimism of the web back in '98 just before the bubble burst."

Actually it is being and has been hyped by apple as the savior of newspapers and book publishers. Just like iTunes was hyped to the record labels. Why do you think Rupert Murdoch and other news types were talking about paywalls before the iPad came out. Apples only goal here is to increase its profits selling hardware, not the profits of news papers and book publishers.

In the end there will be an App for that (the news). It will work something like this ...

-You go to a web site become a member.
-You choose your interests and when you want what articles delivered.
-A Personalized Newspaper is generated of your interests from, blogs, free newspapers, websites of public records and sent to your iPad, etc.
-Recommendations of other articles you might want to read are added based on what other people with similar interests are reading.
-You can comment on all articles.
-You can privately or publically contact the people commenting on the article in an anonymous way.
-you can forward information and corrections to the author publically or anonymously.
-it costs a dollar a month, or its free.
-it destroys the NewPapers.

Re: Better be something worth it

Okay that video was such hype! But if its has the interactive features of wired (sub title this image, etc) It will be kick ass and show the world how to do this right. while I dont think that they can charge much for it a month, including the advertising if done artfully in a wired mag way it might work.

dumb ass

These are some of the most dumb comments i've ever read to a web posting.

OK: first question, my genius futurologists who know the inside out of the NYT's finances:

Q. How much is the current cost of a subscription to the NYT?

Q. How many people are NYT subscribers?

Stuck? Of course you are. Why? Because none of the 43 answers show any knowledge of the newspaper business. Answers...

A. Around $60 a month

A. Just under a million - around 803k

Now it may be that techdirt readers are happy just withering away about 'porn', which is probably the limits of their political education. But 1 million people would like something more substantive to read.

If the NYT produces something of an equivalent value as the paper copy, for half the price then I'd be happy.

If you are not a nyt subscriber, then your opinion on whether or not you would subscribe at $30 a month is mostly irrelevant.

Re: dumb ass

Ah, yes, always title your comment with a direct insult. That way, we know you have something serious to say.

These are some of the most dumb comments i've ever read to a web posting.

Follow it up with a grammatically silly insult to open your post. This way, we know to take you seriously, because you have something important and factual to say.

OK: first question, my genius futurologists who know the inside out of the NYT's finances:

Quite familiar with them, thanks.

Stuck? Of course you are. Why? Because none of the 43 answers show any knowledge of the newspaper business. Answers...

Yes, then make a HUGE and totally false assumption to prove your superiority. Very convincing. I must believe you.

Now it may be that techdirt readers are happy just withering away about 'porn', which is probably the limits of their political education.

Right, and before you actually make any sort of point, make sure to throw in an insulting and ridiculous insult as well. That will make your point that much more convincing to the people who you are clearly much smarter than.

But 1 million people would like something more substantive to read.

And, then, finally make a point that does not follow from the facts at all and sit back and smile. Now people will believe you.

Either that, or they'll realize that this is meaningless statement. A lot more than 1 million people want something more substantive than "porn" to read, and they have lots of options. Among those options is the NY Times. What's your point?

If the NYT produces something of an equivalent value as the paper copy, for half the price then I'd be happy.

You and at least 34 other people, I'm sure. Probably a good number more than that. But is it enough to matter? That's where the economics breaks down.

Your argument appears to be the same as "well, lots of people used to buy CDs, so as long as we produce equivalent value online, for half the price, people will buy." Except, it turns out a lot fewer people do buy. Why? Because of basic economics of supply and demand.

If you are not a nyt subscriber, then your opinion on whether or not you would subscribe at $30 a month is mostly irrelevant.

Ah, and then conclude with a totally bogus line that suggests others should not comment, even if they're actually more knowledgeable on the subject.

For example: if you do not understand economics, then your opinion on the economics of a ridiculously high priced digital subscription is mostly irrelevant.

How many cannibals does it take...

The NYT is already offering two different online editions, each is $15/month for a daily subscription.

"Times Reader" is an Adobe-Air powered app that runs on Mac, Linux and Windows and stores the past seven newspapers offline. "Electronic Edition" runs in the browser, displaying the NY version (including ads) as printed, it also caches content.

If the iPad edition is going to cannibalize the printed paper, what's up with two $15 cannibals they're selling now? Are both these rates going up (or down) to match? What makes them think the content would be worth more $5-15 more on an iCannibal?

Things that make you go Hmmm-- NYTimes + iPad starting at $860 for the first year.

New York Times better have some compelling content to ask for $30 a month.

I just think the amount is a little steep, and many people will have a problem justifying purchase of a $500 device to spend an additional $360 a year on only one content partner (Even more if they opt to purchase the 3G version!)

A better answer may be to adopt something similar to WSJ's pricing scheme where e-Enabled content costs something like $6 a month.

Here's the problem: The print edition of the WSJ is around $120 a year. Now, I realize that the NYTimes is a different paper, but I just find it difficult to justify a fully-loaded one-year $860 iPad/NYTimes expense. It makes the NYTimes $384 daily delivery look cheap!

The price is too high. Maybe that's why the NYTimes is even struggling with their print business.

Re: Re: Why should digital paper costs _have_ to fall?

You are trying to read too much into my point. _All_ I am saying is that there is no reason why a different delivery mechanism should _have_ to mean a different price. Furthermore it isn't clear that the price should have to fall either.

In your example you are not happy that you have to pay two sets of "distribution" costs and therefore the price should fall because the cumulative value now does not add up. Fine. Then you won't buy the product because the value isn't there for you. That is what will cause the price to fall until either the product gives you some value or the company goes bust.

I am guessing the price you will see some value is unlikely to be reduced by the full cost of the reader because you will be using that device for many other purposes. Indeed having access to more content makes that device more valuable and hence probably makes you more willing to pay for content that is valuable to you. Think of that as a value cross subsidy. Now it might be that the increased cumulative value of the entire ecosystem offsets the loss of value of having to pay two "distribution" costs and you _might_ find that you are actually willing to pay more than $20/30. I grant that is highly unlikely you will want to pay more but the basic point remains that the "price" should be set relative to the value of the product and that might decrease, remain the same or increase.

What is the real cost in an e-Distribution model?

I guess I'm having trouble trying to reconcile the fact that once the news is in e-enabled format and the capital expense for the Content Delivery Network (such as Akamai) is paid, distribution costs get closer to zero as market adoption rises.

Put another way, once the infrastructure is in place, the cost to add a customer is pennies because the customer is levying "last mile" costs that were typically paid for by the publisher. Because of this, there are fewer costs such as paperboys, ink, paper, and even newspaper bags. Today, all this is amortized into the print operation. Where does this money go under the new model? Is it reinvested into the product?

Personally, I'll wait to hear for more compelling offers from other news outlets. If this is the best NYTimes can come up with, it's abysmal.

Another looming threat to NYTimes:
CableTV and even local news outlets are already better suited for iPad distribution because they already have, and can offer more compelling multimedia, video, and pizza coupons that provide more value above what the current market rate of $1.99 a week the WSJ charges.

I hope that folks in traditional paper such as the WSJ expand their online offering. I watched a video article from Walt Mossberg this weekend that would be compelling enough to open my wallet a little more and be a better fit for this model. Yes, if more columnists like Walt Mossberg talk about their area of expertise in a candid fashion may be worth more than $1.99 a week.

However, NYTimes hasn't even begun down that path with their regular online offerings.

Again, the main problem I have is in trying to justify the perceived "value" that commentators like Ewan claim to exist, yet fail to apply the very idea that distribution costs fall dramatically. There's little evidence that the actual product wouldn't expand beyond the current status quo.

Caught in the field

Re: Re: Re: Why should digital paper costs _have_ to fall?

You are trying to read too much into my point. _All_ I am saying is that there is no reason why a different delivery mechanism should _have_ to mean a different price. Furthermore it isn't clear that the price should have to fall either.

You're kind of right, in principle, but I think most people feel that if you're paying additional money for the ability to consume a different medium, that medium's price should reflect a savings to recoup that initial investment. Especially when the new medium is less valuable (in the case of ebooke: can't share it, can't write on it, can't use it without power, etc.).

And even if you are trying to maximize profits, you need to be able to drop that price to keep up with competition or they'll price you out of business. In the case of this story, I doubt NYT is prepared to keep prices in check...

Re: Re: Re: Why should digital paper costs _have_ to fall?

You think I'm paying for content. I'm not. I'm paying for a product. And the delivery mechanism should mean a difference in price because the price reflects the costs associated with that product.

The product I get in a newspaper is more valuable than the content. The paper itself can line my cat's litter box, be used to pad boxes so breakables don't break, I can cut stuff out of it, lend it to a friend, or make a bitchin' pirate hat.

With this digital version, I'm getting a different product, with less value in some regards, more value in others, and I expect the price I pay to reflect the difference in delivery mechanism. The content may be the same, but the product is ENTIRELY different.

NY Times unreliable source of information

I no longer trust the information I get from NY Times. They helped get us into the war with Iraq with the Judith Miller fiasco. This is very serious, they have never apologized for their support of lies and misinformation that has cost our country lives and so much money. KBR and Haliburton continue to profit, we are still there and Osama Bin Laden has never been capture. THANK YOU NEW YORK TIMES! I WILL NEVER PAY FOR INFORMATION FROM THEM BECAUSE I HAVE TO FACT CHECK ANYTHING THAT COMES FROM THEM.

They're not very good on the financial reporting either. THEY ARE A HUGE PROBLEM!